Warning over health of Italy’s banks

Italian banks will find it very challenging to get funding in current market conditions, warned Moody’s.
Photo: Bloomberg

Rating agency Moody’s Investors Service has warned that Italy’s banks face worsening conditions over the coming year with asset quality declining, low profitability, and poor access to markets for funds.

With their capital levels low and vulnerable and Italy’s economy still expected to contract through next year, Moody’s said the outlook for Italian banks “remains negative" and at risk of further deterioration.

“Many of these negative rating drivers have intensified during the course of 2012, and . . . this trend is likely to persist," Moody’s said on Monday.

“The ongoing recession is the key driver of asset-quality deterioration, which has particularly affected corporate borrowers."

Moody’s did not set any time frame for rating reviews for the banks.

But it also pointed to the challenges of Italian banks in seeking market funding given the strains on the euro zone region as a whole.

“Market access remains highly confidence-sensitive," it warned, pointing out that Italian banks are the second-largest borrowers from the European Central Bank.